Nowadays it is not unusual for people to want to start their family later in life. It used to be typical for people to have their first child in their early 20’s and now it seems that this has moved to mid-30’s and beyond.
I think that this has a lot to do with our concerns about the affordability of a family and it is fair to say that being settled in a career, and having the financial stability of this, makes the cost of bringing up children easier. However, the start of future parents’ careers can be delayed by completing their own education, and possibly travelling, before settling down to work. Therefore, putting off starting a family until later still.
This can mean that the cost of children and their education is being funded at a time when previously the nest would be empty, and the focus would have shifted to funding your own future and retirement plans.
In addition, some parents like to be able to help their children get a start on the property ladder by helping with a house deposit. Whilst it’s a natural that parents want to help their children, it can have a real impact on their own financial future. Giving away or, loaning significant sums at a time when you may only have 10 years until you retire, should not be done without a great deal of thought. I have seen situations where money has been lent to children only to find that due to a change in their circumstances, they have not been able to repay the loan which has led to their parents either extending their own working lives or, in one case, having to downsize themselves.
My concerns are that we are unable to fully predict what our own financial needs might be, and by helping the children reach their goals we are not considering the impact this could be having on our own financial future.
For example, if you aspire to trade up your own property it can be harder to do so at a later age. Raising a mortgage in your 50’s could lead to a short mortgage term that could make it harder to clear debt before retirement.
Our own financial circumstances can change quickly and can be unpredictable. The cost of long-term care or even our own careers being prematurely cut short cannot be ignored. Focusing on what the children desire could mean you neglect your pension in the earlier years and leave little time to correct this.
I would encourage anyone to consider their own financial needs carefully before making gifts or loans. By understanding the impact this could have on your own future helps you to gauge if this is not only affordable now but, will remain so in the future. As I have written before, it can be far easier to concentrate on the here and now, without giving due consideration to the future.
When it’s family you want to help, your heart can rule your head and regardless of the decision you eventually make, it would seem sensible to go through your options with a financial planner first.
This information is provided strictly for general consideration only. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned about the content hereof and any such action or inaction. Professional advice is necessary for every case.
Kristina Bailey Dip FA CeMAP